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Original Equipment Manufacturer

Definition

Original Equipment Manufacturer (OEM) refers to a company that produces parts and equipment that may be marketed by another manufacturer. OEMs often work closely with the company that sells the final product (known as value-added resellers or VARs) and in many cases, those VARs put their own brand onto the equipment. Thus, the OEM’s products make up the components of the final product, allowing the latter to focus on the system’s assembly and sales.

Phonetic

The phonetic spelling for “Original Equipment Manufacturer” is:Original – /əˈrijɪnəl/Equipment – /ɪˈkwɪpmənt/Manufacturer – /ˌmanjəˈfækʧərər/

Key Takeaways

Original Equipment Manufacturer: Main Takeaways

  1. Definition: Original Equipment Manufacturer (OEM) refers to companies that produce equipment and components that are marketed by another manufacturer. The term is often associated with components such as computer hardware, car parts or even software that the purchasing company uses in producing its own goods.
  2. OEM vs. Aftermarket: Unlike aftermarket parts, OEM parts are made by the same company that manufactured the original component of the product. As a result, OEM parts are usually considered of higher quality and better fit as they are designed and tested by the original maker.
  3. OEM Relationships: Traditional OEM companies not only manufacture but also sell products under their own brand name. However, some OEMs focus on production and establish partnerships with other companies for the distribution and marketing of the products. This enables them to specialize in manufacturing and increase efficiency and profitability.

Importance

The term Original Equipment Manufacturer (OEM) is important in the technology sector because it refers to a company that produces equipment or components that are then used in the final products sold by another company, typically known as the value-added reseller (VAR). This business model allows for product specialization, cost savings, and quality control. OEMs can focus on honing their manufacturing process for a particular component, rather than the entire device, ensuring a high level of expertise and quality in their specific domain. VARs, who integrate these components into their final products, benefit from not having to manufacture those parts themselves, saving on production costs and time. Therefore, the existence and reliability of OEMs play a significant part in the technology product supply chain and overall market efficiency.

Explanation

Original Equipment Manufacturer, often known as OEM, refers to companies that produce parts and equipment that may be marketed by another manufacturer. The purpose of an OEM is to create products, either a component of a larger product or a stand-alone product which is usually sold in bulk to what is known as a ‘value-added reseller’ (VAR). The VAR then adds their own customizations or enhancements to the product and sells it to end users under their own brand name. For example, if you consider the automotive industry, a part like an alternator might be manufactured by an OEM and, it is then sold to a car manufacturer who uses it as a component in producing a complete vehicle.OEMs are used extensively across several sectors such as electronics, automobiles, computer hardware, and software industries, among others. In the technology sector, OEMs can create software and hardware that are incorporated into the end product of another company. For instance, a Microsoft Operating System that comes pre-installed on a new laptop; although Microsoft is the creator of the software, they are the OEM and the laptop brand purchases this software to complement their hardware product offering. The final product, the laptop with all its components and features, is then sold to the consumers. So the purpose of OEMs is to facilitate ease of manufacturing and customisation, to enhance functionality, performance and to ensure standards are met in the final product.

Examples

1. Apple Inc: Apple is a major example of an Original Equipment Manufacturer (OEM). All the hardware of their products, like the iPhone, iPad, and Mac, is exclusively designed and manufactured by the company themselves. However, they also source certain components like processors from other OEMs to ensure the overall quality and performance of their product.2. Ford Motor Company: Ford designs and manufactures parts and equipment that their cars require. This can range from engine parts to body components, ensuring that all are produced to their strict quality requirements. However, for certain parts like tyres or glass, they might work with other OEMs.3. Dell Technologies: Dell is a prime example in the field of computer technology. They design, manufacture and sell their own computers and related products like monitors, printers, etc. They ensure that all Dell products are maintained at a high standard as they control the production of its vital components.

Frequently Asked Questions(FAQ)

Sure, here are some frequently asked questions and their answers pertaining to the term “Original Equipment Manufacturer”.**Q1: What is an Original Equipment Manufacturer (OEM)?**A1: An Original Equipment Manufacturer, or OEM, is a company that manufactures and sells products or parts of a product that their buyer, another company, sells in their own name. The buyer is often referred to as a Value-Added Reseller (VAR) because by augmenting or incorporating features or services, they add value to the original item.**Q2: What is the difference between OEM and ODM?**A2: OEM stands for Original Equipment Manufacturer, while ODM stands for Original Design Manufacturer. An OEM makes products or components that are used in another company’s end product. An ODM designs and manufactures products which are rebranded by other companies and sold under their own brand names**Q3: What are OEM parts?**A3: OEM parts refers to the components that are used in the original product. These parts are the exact parts that are used in creating the original product, hence the term OEM or ‘original equipment manufacturer’.**Q4: Are OEM parts better than aftermarket parts?**A4: OEM parts are designed to be an exact replacement for the original parts, which can make them a better fit and ensure a higher level of quality and performance. Aftermarket parts, on the other hand, might not have the same level of fit or performance, but they often offer more variety and can be less expensive.**Q5: Are OEM products always more expensive?**A5: Typically, OEM parts and products are more expensive than their aftermarket counterparts because they carry the brand name. However, they often come with a better warranty and higher assurance of quality.**Q6: Can you buy OEM products directly?**A6: It depends on the company and the product. Some OEMs sell directly to consumers, while others sell their products through authorized resellers only. **Q7: What is the function of an OEM in the tech industry?**A7: In the tech industry, an OEM can be any company that makes a part or subsystem used in another company’s end product. For example, a company that manufactures batteries that are used in mobile phones or laptops is an OEM. **Q8: How does the OEM business model work?**A8: In an OEM business model, a company produces parts and equipment that may be marketed by another manufacturer. The second manufacturer is referred to as a VAR because they add value to the original product with additional features, services, or both.

Related Tech Terms

  • Aftermarket
  • Product Outsourcing
  • Mass Production
  • Component Parts
  • Assembly Line

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